Luxury Stocks: A Recovery on the Horizon?

European luxury stocks have significantly underperformed over the past two years, declining by roughly 20% over the last 24 months, while the Euro Stoxx index has gained around 30%. Valuations have also compressed: the sector’s forward P/E ratio has fallen from about 27x to roughly 20x over the same period.

This slowdown follows an exceptionally strong period, marked by three years of post‑Covid boom. Since then, momentum has faded. In 2025, many leading luxury groups reported declining sales or weak growth. Margins are under pressure, and demand from China remains weak. At the same time, the strong performance of sectors such as technology, electrical equipment and defense has drawn investors’ attention away from  luxury and other consumer stocks, which tend to be more cyclical and sensitive to geopolitical tensions.

Our analysis

Despite ongoing near‑term headwinds, the prospect of a cyclical rebound by the end of the year has not disappeared. The luxury sector’s fundamentals remain robust, supported by high barriers to entry (very few new global brands have emerged over the past fifty years), strong pricing power and enduring brand desirability — all of which provide long-term competitive advantages.

Looking further ahead, several factors could help improve the sector’s outlook. In the near term, easing geopolitical tensions in the Middle East would be supportive. Over the longer run, growth could benefit from continued strength in the U.S. economy, a gradual stabilization of Chinese demand and the recovery of international tourism flows.